Saturday, October 23, 2010

The Golden "Bubble" - Time to Buy, or Sell?

Two articles recently caught my eye concerning the current and future price of gold.

One from the free, free market oriented "Daily Bell" daily newsletter entitled "The Golden Bubble", .. and the second from USA Today "Want To Invest In Gold-You have options"


The Daily Bell article asks the question "is gold in a speculative bubble right now?, while the USA Today article asks the "investor" if they wish to invest in gold _because_ it has done so well and presumably will [according to USA Today] continue to do so, and how to go about it based on the assumption of continued good performance.

[Onebornfree commentary: Is gold in a bubble right now? 'Truth is nobody really knows.[Having said that, the mere fact that it is being seriously considered as an "investment" in a mainstream publication like USA Today _should_ set some alarm bells off for you, dear reader!

Ultimately however,hindsight is 20:20, meaning the only way to know for certain if we are in a "gold bubble" situation now will probably be in 5 or 10 years from now,looking back.

Even then, it is a matter of individual perception- after all, "one persons mountain is another persons molehill".


I can think of two good reasons for buying gold now:

[1]as part of a fully diversified long term savings plan.

As part of a long term savings plan for money that cannot afford to be lost, a certain percentage of total savings is always allocated to gold bullion.

This gold is bought regardless of current price or supposed future outlook for the gold market. My long term savings plan recommends that you _always_ keep a certain percentage of your savings in gold, come what may [and so the question of whether or not gold is or is not in a bubble right now is not even an issue].

or,

[2] as a short to medium term speculation for those who think that gold is either [a] in a bubble that still has a long way to go upward [and therefor takes a "long position" betting on continuance of the upward trend] , or [b] is "an accident waiting to happen" and about to suffer a significant price collapse [a "short" position- profiting from a decline in golds price as measured in $US].

As nobody can predict the future of gold prices, ALL speculations [i.e both long or short positions] should only be made with money that the individual can afford to lose.

My Own Golden "Bubble" Thoughts.

At this time my own thoughts, particularly in light of the USA Today article linked above, is that a peak may well have been reached and that it might therefor be a good time to set a stop loss [if you have not already done so] on any speculative position you currently hold in gold and be prepared to get out.

Of course, I have my own private thoughts on where that stop loss should be placed etc.etc.

Also, I intuitively still lean more towards a further deflation, as opposed to the inevitable inflation that most "hard money" types see ahead right now, which means that, speculative gold "bubble" or not, ultimately the price of gold, relative to cash "_must_" fall considerably at some point, "logically speaking"[!]

Regards, onebornfree

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Financial Safety Services is a private , mostly off-line consulting service that attempts to show its real-time [i.e. non-internet derived] clients how to speculate safely with money that they can afford to lose. Money that the client cannot afford to lose should never be risked in these speculations

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